I’m currently helping someone sell their business to a huuuuge perfect-fit buyer who popped up out of the blue with a great life-changing offer…

BUT

… and there has to be one…

… the buyer doesn’t want the company… they just want to buy selected assets…

OOOPS

Below I go into the pros & cons of selling the shares in your company or selling the company’s assets… but just now I want to focus on one thing…

The real Bottom Line…

… I’m talking net proceeds received by the seller on the sale of their single biggest financial asset…

Sell the shares in the company and the seller will be taxed at the Entrepreneurs Relief rate of 10%

Sell the assets of the company and the seller will be double taxed… because… 1st the company will pay corporation tax on the gain on selling the assets… & 2nd the owner will be taxed when they try to extract the cash from the company…

In this case an offer of £4m results in roughly net cash proceeds of

£3.6m if the company’s shares are sold

£2.1m if the company’s assets are sold

They’ll get 70% more cash in their hand if they sell shares and not assets

What to do ?… hold out for a share sale ? … or use the huge difference in net proceeds to shave the selling price and encourage the sale of shares…

In this case the seller can drop the price to £2.4m if the buyer will take shares… and still come out ahead of an asset sale…

That leaves a fair bit of scope for the imagination… and deal-making?

Some slightly dull detail… from the sell side

In a share sale the buyer acquires the shares of the company that owns the trade and assets of the business

In an asset sale the buyer acquires the assets which make up the business (e.g. property, machinery, intellectual property and goodwill)

Typically a share sale is more attractive from a tax perspective to a seller than to a buyer… an asset sale will often be more tax efficient for a buyer than a seller (but recent tax changes have narrowed the gap)